Origins

In 2008, Dr. Elliot Fisher introduced the concept of an “Accountable Care Organization” during a meeting with the Medicare Payment Advisory Committee (MedPAC) in reference to a new payment arrangement where all providers share accountability for the continuum a patient’s care.

An Accountable Care Organization is a groups of doctors, hospitals, and other health care providers who agree to be paid under a reimbursement system that aims to incentivize high-quality coordinated care for Medicare Patients.

Video

Kaiser Health News has a 3-minute informative introduction to ACOs:

The Problem

There are two main problems facing the US health care system.

1. Cost: We spend significantly more on healthcare than all other countries
2. Quality: And yet, we’ve seen a decline in life expectancy for the past 3 years

Medicare traditionally paid providers and hospitals through a Fee For Service (FFS) payment system. That is, payments are made to providers and hospitals for each service provided.

This creates an incentive to prioritize the quantity of services over the quality of services. As a result, we see duplicative services and poor coordination of care for patients, which ultimately lead to poor outcomes.

ACOs are responsible for:

• declaring which financial Track they would like to pursue.
  • ACOs in Track 1 participate in one-sided risk (shared savings only)
  • ACOs in Tracks 1+, 2, and 3 participate in two-sided risk (shared savings and shared losses).
• Providers see patients and send claims and bill CMS as they usually would Medicare beneficiaries
• Providing data on quality measurements to ensure they are eligible to share in any earned savings and avoid shared losses at the maximum level

CMS is reponsible for:

• assigning beneficiaries to the ACO by attributing beneficiaries to the providers from whom they receive the majority of their care.
• determine a benchmark based on prior expenditures, which sets a target for ACOs to limit their spending
• determining the Minimum Loss Ratio (MLR) / Minimum Savings Ratio (MSR) depending on the declared financial Track.
• processing claims data to determine total expenditures
• reconciling the difference between expenditures and the benchmark to determine whether or not savings or losses were incurred.

For more information, you can read about the full process from CMS’s MSSP Methodology